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Very good observations. And indeed, the whole notion that maximising shareholder value is the goal to pursue stems, I think, from a naive "economism", as James Kwak called it in his excellent book Economism: Bad Economics and the Rise of Inequality [1], namely the following train of thought: The whole point of society is to maximise utility. We can't do interpersonal utility comparison, so we're satisfied with a Pareto optimum (where you can't improve anyone's situation without making someone else worse off). By the two main theorems of welfare economics, Pareto optima are basically equivalent (under the "usual" assumptions) to market equilibria. Thus, free market. Next, there's the agent/principal problem: the principals (owners=shareholders) of a company delegate the actual running of it to agents (managers), and now the problem of value alignment arises - the managers could be tempted to maximise their own utility (empire building etc., or even beneficial things such as employee health insurance) instead of that of the owners. And the theory suggests that the solution is maximising shareholder value, because then the owners can themselves decide how to allocate the proceeds (eg into voluntarily providing employee health insurance) as to maximise utility. [As an aside, btw, the theoretical case for free trade rests on an Economics 101 argument (comparative advantage), but is predicated on redistribution (free trade creates efficiency gains such that even after compensating losers you still retain a surplus, therefore it's better). However, the funny thing is that the (eg libertarian) figures promoting free trade frequently conveniently forget about that part of the argument.] And of course the whole pareto optimum/market equilibrium/maximising shareholder value argument is based on assumptions that just don't hold; the world is more complicated than Econ 101, and very often more careful empirical examinations of the evidence support much more progressive/liberal policies than Economism suggests. (That's also the gist of Kwak's book, IIRC.) TLDR: Growth at all costs is not necessarily the nature of the game, it's contingently so because of flawed policies and flawed economics: the oh-so-rational, yet so limited Econ 101 view that MBA students are typically subjected to. [1] https://economism.net/ |